Major BPO Contracts Are Back

By John Willmott

On April 10th, NelsonHall presented its quarterly BPO Index webcast, reviewing the current state of the global BPO marketplace. One of the key developments has been the re-emergence of major BPO contracts, with the average value of the top 20 contracts in 2007/8 reaching $546m, up 43% on 2006/7.

Reviewing the BPO market in 2008 so far, NelsonHall revealed the following significant developments in Q1:

  • The emergence of increased mortgage processing activity (IBM was awarded a mortgage services processing contract by Coastal Federal Credit Union, and Zenta expanded its mortgage processing services capabilities in the U.S.)
  • The scope of U.K. local government contracts continued to increase (the IBM Southwest One joint venture was awarded a contract for customer service, workforce development and procurement services by Avon and Somerset Police authority, Capita was awarded a property & highway services contract by Sefton MBC, and Eaga was awarded the digital switchover contract)
  • Increasing globalization of insurance (Crawford & Company formed a global markets division to target organizations entering new geographies, Capita was awarded an £87m life and pensions BPO contract by British Islamic Insurance Holdings, and TCS was awarded a £100m life and pensions BPO contract by Sun Life Financial of Canada)
  • Increasing domestic activity in India (IBM Daksh was awarded a 5-year customer services contract by MakeMyTrip)
  • Acquisition activity continues in RPO and compensation consulting (Kenexa acquired Quorum International, Manpower acquired CRI and Vitae, and Hewitt acquired New Bridge Street Consultants and Csi)
  • Continued validation of outsourcing F&A shared services centers (Capgemini was awarded an F&A outsourcing contract to support Unilever's Latin American businesses)

Major multi-process HR outsourcing contracts have been absent for past three quarters, and HR outsourcing is instead focusing on global development of specialized service line capability. However, there are increasing levels of F&A outsourcing contract activity, and the market is increasingly dominated by industry-specific and front-office contract activity.

In the past 12 months, BPO contract value awarded increased 118% (+20% excluding U.S. defense contracts), with Europe showing underlying BPO TCV growth of 30%.

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